Some in Brazil gov't see room to end rate hiking cycle -sources

BRASILIA, June 2 (Reuters) - Some members of President Dilma
Rousseff's economic team believe a brighter inflation outlook
should lead Brazil's central bank to slow the pace of interest
rate hikes or even halt them altogether at its July meeting, two
officials told Reuters.

Brazil's central bank is widely expected to raise interest
rates by 50 basis points at its next meeting on Wednesday for
the fifth straight time to 13.75 percent, lifting borrowing
costs to a six-year high and well above those in other major
economies.

Although the aggressive pace of rate hikes that started in
October is a key part of the government's strategy to regain
investors' confidence, some members of Rousseff's economic team
outside the central bank are worried more tightening could
deepen what is expected to be the worst recession in 25 years.

"We have put the house in order so we don't believe there is
a need for the central bank to be so tough," said an official
close to the economic team who asked for anonymity to speak
freely. "Indicators show that monetary policy is working."

Another senior official outside the central bank said he
expects policymakers to soon end the tightening cycle, which
lifted rates by 225 basis points in six months. A continued
decline in long-term inflation expectations should convince
policymakers it is time to stop, the source said.

After Wednesday's policy meeting, the central bank's next
one is scheduled for July 29.

A central bank spokesman declined to comment.

Rousseff and her economic team have been under fire from
lawmakers and some business leaders for tightening fiscal and
monetary policies at a time when the economy is shrinking.
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